Gold standerd economy better?

The following section is a series of revised quotes taken form a book called
The creature from Jekyll Island, by G. Edward Griffin.
THE MISLEADING THEORY OF QUANTITY

It often is argued that gold is inappropriate as money because it is too limited in supply to satisfy the needs of modern commerce. On the surface, that can sound logical - after all, we do need a lot of money out there to keep the wheels of the economy turning but, upon examination, this turns out to be one of the most childish ideas imaginable.

First of all, it is estimated that that approximately 45% of all the gold mined throughout the world since the discovery of America now in government or banking stockpiles. There undoubtedly is at least an additional 30% in jewelry, ornaments, and privet hordes. Any commodity which exists to the extent of 75% of its total world production since Columbus discovered America can hardly be described as in short supply.
The deeper reality, however is that the supply is not even important. Remember that the primary function of money is to measure the value to the items for which it is exchanged. The supply of gold in the world does not affect its ability to serve as money, it only affects the quantity that will be used to measure any given transaction.

Why is a gold standard economy necessary?

As of today all a government needs to do to increase their real income is slap some ink on paper and spend the proceeds on commodities doing things like this will cause inflation – a hidden tax for its population.

Government dislikes gold because it hinders their ability to counterfeit. That is, print intrinsically worthless paper that is also nearly always debt-bearing at point of origin. Every dollar in your pocket represents a dollar owed, plus interest, but only the dollar was created, do you understand?

The word ‘inflation’ itself is twisted around to make people think it is anything other than what it actually is. An older dictionary should make this point clear.

Staff: Mentor

I'm sorry, but you guys simply don't understand what "money" is in market economics.

A gold standard ensures a stable economy.

No. It doesn't. Being a limited resource, its value can fluctuate greatly based on supply and demand. It can however stabilize the economy - like an anchor by limiting its growth.

As of today all a government needs to do to increase their real income is slap some ink on paper and spend the proceeds on commodities doing things like this will cause inflation – a hidden tax for its population.

Though caused in part by the money supply, inflation is MEASURED on the product side - by the price of goods.

Government dislikes gold because it hinders their ability to counterfeit. That is, print intrinsically worthless paper...

Though intrinsically worthless, that piece of paper makes a far better currency (and backing for currency) than gold. The US dollar is actually used as the backing for many countries currencies today. Ask yourself why a country would choose to back its currency with USD instead of gold. (Hint: stability)

And counterfiet? How can the government counterfeit its own currency?

The word ‘inflation’ itself is twisted around to make people think it is anything other than what it actually is. An older dictionary should make this point clear.

Sorry, I don't have an obsolete dictionary lying around. Could you enlighten me?

Annother question: given that a USD is intrinsically worthless, where does it get its value from? (Hint: there is something ENORMOUSLY valuable backing the US dollar)

Doesn't seem to me that the lack of a comodity backing has hurt it at all - the US economy is the most successful economy in the history of the world. Given our success, why would you want to change?

No. It doesn't. Being a limited resource, its value can fluctuate greatly based on supply and demand. It can however stabilize the economy - like an anchor by limiting its growth.
quote:

Keynesian economic theory?
Is a multi-trillion dollar National debt stable??
Where is the check on governmental spending that keeps the National debt down when the gold standard is dropped to allow for a credit based system, and what prevents devaluation of the dollars I’ve been saving?

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As of today all a government needs to do to increase their real income is slap some ink on paper and spend the proceeds on commodities doing things like this will cause inflation – a hidden tax for its population.
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Though caused in part by the money supply, inflation is MEASURED on the product side - by the price of goods.

This is typical of how people’s understanding has been misdirected from the actual culprit. As you complained of obsoleteness I’ll try to provide something more up to date (dictionary.com);

in•fla•tion ( P ) Pronunciation Key (n-flshn)
n.
The act of inflating or the state of being inflated.
A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.

Please note what causes it, it will help you understand the level of deception the next time you see an economist on the television trying to pin the blame on consumers.

quote:
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Government dislikes gold because it hinders their ability to counterfeit. That is, print intrinsically worthless paper...
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Though intrinsically worthless, that piece of paper makes a far better currency (and backing for currency) than gold. The US dollar is actually used as the backing for many countries currencies today. Ask yourself why a country would choose to back its currency with USD instead of gold. (Hint: stability)

First off I should ask; Have you ever tried the gold standard personally so as to have some first-hand knowledge about it, or is reading government approved texts good enough?
Do you understand what took place at Bretton Woods, and it’s aftermath? Yeah, they tied it to the US dollar alright, haha.

And counterfiet? How can the government counterfeit its own currency?

You aren’t trying very hard to understand. Fiat Money is really a counterfeit, money substitute. That's why they have to declare it as being money (...this note is legal tender, for all debts public and privat, blah, blah, blah...) Otherwise you wouldn't know. On the other hand, no one needs to tell you that a gold coin has value.
Here is a semi-propaganda filled link;

quote:
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The word ‘inflation’ itself is twisted around to make people think it is anything other than what it actually is. An older dictionary should make this point clear.
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Sorry, I don't have an obsolete dictionary lying around. Could you enlighten me?

Yes, I already did, see definition above.

Annother question: given that a USD is intrinsically worthless, where does it get its value from? (Hint: there is something ENORMOUSLY valuable backing the US dollar)

To be brutally honest, and with no ill will intended? From people just like you who are convinced it is actually worth something and prepared to exchange real wealth for paper dollars. During high inflationary times, people go after gold, not wheelbarrows full of paper dollars. I think this might have something do with there being something Enormously valuable about it, to borrow a phrase.

Doesn't seem to me that the lack of a comodity backing has hurt it at all - the US economy is the most successful economy in the history of the world. Given our success, why would you want to change?

Given that the original poster of the question is 14yo, I don't necessarily think EVERYONE has minimal economics. Part of the process of education is asking questions. This forum seems to be a good place to get a variety of opinions and insight.

You say that you can't trust the price of gold to remain stable. Is that because the value of gold fluctuates or because the value of the dollars buying it fluctuates? Can you give a reference to read that will help in understanding your perspective?

If a student wanted to grow up and become one of those who manage the monetary system, what books would you recommend he read along the way?

Originally posted by Windy People who are a hell of a lot smarter than you manage the monetary system, so relax.

Alan Greenspan;
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. ... This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.”

Before you start tossing around insults again you might actually try reading some of what those people who are smarter than you have had to say about the matter, cho !

Some high level people do understand exactly what is going on, even if they choose to play along with the game.

Why, even Lord Keynes understood all about it;

"By this means government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft."
-John Maynard Keynes (the father of 'Keynesian Economics' which our nation now endures) in his book "THE ECONOMIC CONSEQUENCES OF THE PEACE" (1920).

"If Congress has the right [it doesn't] to issue paper money [currency], it was given to them to be used by...[the government] and not to be delegated to individuals or corporations"
- President Andrew Jackson, Vetoed Bank Bill of 1836

Staff: Mentor

Originally posted by BoulderHead Is a multi-trillion dollar National debt stable??
Where is the check on governmental spending that keeps the National debt down when the gold standard is dropped to allow for a credit based system, and what prevents devaluation of the dollars I’ve been saving?

The national debt existed before we went off the gold standard (and I agree a high national debt isn't a good thing). Credit existed before we got off the gold standard. Your beef appears to be with inflation, which ALSO existed before we got off the gold standard. The US dollar IS stable. Again, thats why it and not gold is the backing of choice for a large number of foreign currencies.

It also appears that you want to go one step beyond the gold standard to using actual gold coin. You do understand thats not the same thing, right?

And it also seems like you base part of this on mistrust of the government. Thats understandable but misplaced in this case.

And the definition you posted though correcet doesn't tell the whole story - when available goods and services increase, if the money supply doesn't increase with it, you get DEFLATION, which is far worse than inflation. Deflation is an economic death spiral.

During high inflationary times, people go after gold, not wheelbarrows full of paper dollars.

Clearly - but high inflation is a SYMPTOM, not a cause of a bad economy. The other 98% of the time, gold is a far worse investment than say, US T-Bills. Have you seen how volatile gold has been in the past 50 years or so? Its crazy.

I'll reiterate - the US economy has been the most successful economy the world has ever seen. Most of that success has happened since we went off the gold standard.

Staff: Mentor

Originally posted by bulloughclan Given that the original poster of the question is 14yo, I don't necessarily think EVERYONE has minimal economics. Part of the process of education is asking questions. This forum seems to be a good place to get a variety of opinions and insight.

Sorry, I may have slammed the door a little hard, but that was mostly due to BoulderHead's post, not yours. You are right - asking questions and having discussions is a good thing.

You say that you can't trust the price of gold to remain stable. Is that because the value of gold fluctuates or because the value of the dollars buying it fluctuates? Can you give a reference to read that will help in understanding your perspective?

Excellent, excellent question. Up until 1971, US dollars were still "convertable" to gold. Essentially, the value ce of gold was fixed to the value of the dollar (as opposed to the value of the dollar being fixed to the value of gold).

Have a look HERE. Because of the way the page is written, you will need to click "1833 - 1999 Yearly Averages" in the "YEARLY GOLD CHARTS" part to get to the historical value of gold.

Now THIS link isn't as pretty, but it shows on the left side the consumer pricing index and just to the right of that, quarterly (annualized) inflation sincce 1947. Notice how relatively smooth inflation has been historically.

Now compare the two links - the first link is the relative value of gold vs the dollar. The second is the absolute value of the dollar. Conclusion: up to 1971, the dollar gave the price of gold stability, not the other way around. Since the end of convertability, the price of gold has fluctuated chaotically, while the value of the dollar has decreased slowly, smoothly, and predictably.

If a student wanted to grow up and become one of those who manage the monetary system, what books would you recommend he read along the way?

The place I'd start is taking economics in school at your first opportunity. If your school doesn't offer it, pick up a textbook or a book with a basic overview of traditional economics. Be careful though - economics isn't quite the exact science as science is, so there are a LOT of books out there with economic theories that challenge traditional economics (books on the gold standard for example). I urge you to learn the ACCEPTED theories on economics before trying to tackle some of their attackers.

Russ,
What I'm against is dishonest money and dishonest monetary systems.
While US dollars such as those issued under President Kennedy were inflationary, at least they didn’t carry the burden of interest at point of origin. We need to have an in-depth discussion here about some very serious business, but I’m not sure I want/ought to do it...
-BH

The national debt existed before we went off the gold standard (and I agree a high national debt isn't a good thing).

I was trying to make the point that tying the dollar to a fixed amount of gold retards the ability to run the printing presses, and helps to keep government honest. Without it, well, it’s easy to see what has happened.

Credit existed before we got off the gold standard.

I’m aware of that. Are you aware of what happened in 1913?

Your beef appears to be with inflation, which ALSO existed before we got off the gold standard.

See above.

The US dollar IS stable. Again, thats why it and not gold is the backing of choice for a large number of foreign currencies.

You are far off base. You need to at least understand some things concerning Bretton Woods, and more, before you can start to understand the answer to this. Also, if nine countries print their monopoly money faster than the tenth cares to keep pace with, what might happen to the relative values?

It also appears that you want to go one step beyond the gold standard to using actual gold coin. You do understand thats not the same thing, right?

Forget what I might want, it isn’t really essential to this conversation, but yes, I understand a good deal about these things.

And it also seems like you base part of this on mistrust of the government. Thats understandable but misplaced in this case.

Please, what other organization is responsible for amassing the National debt? No government on earth wants to be limited in what it can spend and with the system you support they aren’t. The system you support devalues people’s savings and hurts those living on fixed incomes. It also robs from future generations to spend now. If you do not successfully invest your 'money' it becomes worth less, and less, and less. You’re acting like government can be trusted to not run up the debt until it reaches astronomical proportions when in fact it has already done exactly this and continues on the same course. Now, if you want to continue blindly trusting the fox to guard your hen house because you were taught an economics course that came with a governmental stamp of approval, well, that is your prerogative. However, don’t expect me to keep my chickens in there with yours.

And the definition you posted though correcet doesn't tell the whole story - when available goods and services increase, if the money supply doesn't increase with it, you get DEFLATION, which is far worse than inflation. Deflation is an economic death spiral.

First, forget the “whole story”. I was correcting your misunderstanding of the word inflation and nothing more. Now you are setting up something of a straw man called deflation and using it as a justification for inflation.
We can talk about that too, but one item at a time works best for me.

…Clearly - but high inflation is a SYMPTOM, not a cause of a bad economy.

That is just crazy. If high inflation can’t cause a good economy to turn south, then why don’t we wait until the economy is doing really good, then print up a few million dollars for every living person to spend? Hey, it’s not like it would harm the economy is it?

. Have you seen how volatile gold has been in the past 50 years or so? Its crazy.

The reason your thinking is upside down here is because you mistakenly believe that the dollar is stable, it isn’t. Lots of shuffling gets down on the National and International level to keep the house of cards from falling. Now, if you were holding a gold coin as your standard instead of looking at the world through a dollar bill you would see that the dollar is actually the more volatile instrument. You could also read the last sentence here, to see what might have been fluctuating;http://civilwar.bluegrass.net/HomeFront/greenbacks.html

I'll reiterate - the US economy has been the most successful economy the world has ever seen. Most of that success has happened since we went off the gold standard.

The first part really doesn’t make an effective statement (isn’t everyone else doing about the same thing, after all?), and the success just may have happened despite going off the gold standard.

Excellent, excellent question. Up until 1971, US dollars were still "convertable" to gold. Essentially, the value ce of gold was fixed to the value of the dollar (as opposed to the value of the dollar being fixed to the value of gold).

Oh boy, where to begin? What exactly is a ‘value’ that is fixed to something anyhow?
The dollar was defined by law in terms of specie, Russ, not the other way around.
The dollar is fiat, after all, and it was ‘decreed’ to be exchangeable for a certain weight of precious metal. Certain bills that you possibly have never seen in your lifetime said;
“redeemable in lawful money.”
This is an admission, of course, that the paper instrument was not in and of itself lawful money, merely redeemable for same. If the gold was actually the lawful money (lawful money seems to have been an undefined term), I wonder what you’re left holding in your hand when the dollar is no longer convertible, haha !

Here is a nifty link with some paper money pictures, unfortunately the larger image links don’t seem to be working (I’m glad I saved a few of these bills before the truth began to be lost to history, and many economics courses);http://www.visi.com/~mts/history2.html

This topic is also going to bring up Article 1, Section 10 of your US constitution. If you know of any reference where I might find mention of a Ratification process used to lawfully amend it, I’d appreciate checking it out.

Staff: Mentor

Originally posted by BoulderHead Russ,
What I'm against is dishonest money and dishonest monetary systems.
While US dollars such as those issued under President Kennedy were inflationary, at least they didn’t carry the burden of interest at point of origin. We need to have an in-depth discussion here about some very serious business, but I’m not sure I want/ought to do it...
-BH

I'm missing a fundamental part of your point here - what exactly do you mean by a "dishonest monetary system"?

Just a guess, but do you mean attaching a value to something that lacks intrinsic value?

Just one point for the moment from your last post:

The reason your thinking is upside down here is because you mistakenly believe that the dollar is stable...

Maybe we need to be a little more specific in our definition of "stable." Up and down fluctuations of 100% or more from one year to the next is what I would consider "unstable." Thats what gold has done since it was decoupled from the dollar (not every year, but many times). Long term yearly change of <10% (max of about 15% actually) is "stable." Thats what the dollar has done since gold was decoupled from it.

Russ,
You may not understand, or even know about, the difference between a US dollar and a Federal Reserve Note. If this is the case I ought to explain it to you, if you ask. I have doubts they teach about such things, but it has been many, many years since I went to school. You can probably do a google search for executive order 11110 (the year was 1963) and find out more about it.
-BH

Staff: Mentor

Originally posted by BoulderHead Russ,
You may not understand, or even know about, the difference between a US dollar and a Federal Reserve Note. If this is the case I ought to explain it to you, if you ask. I have doubts they teach about such things, but it has been many, many years since I went to school. You can probably do a google search for executive order 11110 (the year was 1963) and find out more about it.
-BH

I'll touch on the stability issue you raised next time.

I'm really not interested in a conspiracy theory discussion right now. But if you want to talk economics, I'll listen.

I'm really not interested in a conspiracy theory discussion right now. But if you want to talk economics, I'll listen.

*edit to remove rant*

Ok, my apologies. In reading over my post I see where you picked up the conspiracy idea. Let me attempt a clarification; what I meant by “government stamp of approval” is that because the government plays a hefty role in the school system, you end up hearing what they would like you to hear. In truth there are so many things you could be taught you’d never finish school if certain things weren’t selected for inclusion in the curriculum and other things excluded.
Now, while you might think that you are receiving an unbiased education, the truth is closer to this; your mind, like a blob of cookie dough, is shaped in a way to have you come out neatly packaged and ready for functioning within the society you live.
One of the things I enjoy is purchasing old school books (from various countries). Anything covering politics and/or history is what I look for. By reading these books it becomes easy to see the slant that all sides have built into their texts. You see, this isn’t conspiracy, it’s just the way things end up being done. There is a framework for thought built around your mind, and while you may be presented with some interesting and even controversial views to ponder, the likelihood of being fed things that would have you ready to trash the system is slim. You will be taught how to work within the system you have, not pick to death at each and every flaw about that system…
Does this make any better sense now? This is one of the reasons why I have often said “all is brainwashing”.

I have nice example from your American History that I could provide. I’m quite certain you would never have been taught this in school, and yet for those who take the time to do the reading it sticks out like a sore thumb and really makes you think. It ties into the topic of banking nicely, too.

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
-Henry Ford

A federal reserve note used to be kind of like a check (a flawed analagy, but go along with me here). It was redeemable to the government for actual goods (valuable metals such as gold and silver). Now it is only "dollars" - paper - that you can't trade in to the government for anything.

Well, not completely as there is more to it than that. You’re not really incorrect, just incomplete. Allow me to critique;

A federal reserve note used to be kind of like a check (a flawed analagy, but go along with me here). It was redeemable to the government for actual goods (valuable metals such as gold and silver).

Yes, at one time the FRN’s were redeemable in specie, and yes, this is no longer true. To be altogether too brief and to set aside the redemptive value for a moment; FRN’s are instruments that carry with them not only the requirement of principle repayment, but also a payment of interest. The United States Notes, of which I spoke, did not have the debt of interest attached, making them an interest-free currency. This does not mean, however, that they weren’t inflationary.

To over simplify a very complex system into something bordering on the ridiculous, imagine a first instance of borrowing where I am the bank and you come to me for money. I print your money for you (say $1000) and because of the interest you are going to be charged you must pay me back $1050. If we two were the only ones involved in this transaction, and I’m the only one with the printing press, can you tell me where you will get the other $50 from to pay me (since it was never created in the first place)?
Of all the things that could happen two of them might include; you are forced to borrow again in order to pay the interest of the previous loan (only delays the inevitable), or you will have to surrender actual wealth (money is not wealth, btw) to the lender (and in this case the one with the printing press is the winner). Here is something Thomas Jefferson had to say about that;

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."
-Thomas Jefferson

Incidentally, for those who do not know it, the Federal Reserve is a private bank (You don’t own it, and neither does the US government). If you have one in your area and wish to confirm this, don’t look in the government section of the phone book (they aren’t there), look in the yellow pages. It is a private banking consortium run for profit...
…they probably didn’t feel it necessary to mention that in your economics class.
The US notes during the Kennedy administration bypassed the Fed (and the interest) and were backed by specie.

Now it is only "dollars" - paper - that you can't trade in to the government for anything.

Well, I think that FRN’s are redeemable, technically; you take one to a bank and they exchange it for another FRN, haha

Staff: Mentor

Originally posted by BoulderHead what I meant by “government stamp of approval” is that because the government plays a hefty role in the school system, you end up hearing what they would like you to hear. ...Now, while you might think that you are receiving an unbiased education, the truth is closer to this; your mind, like a blob of cookie dough, is shaped in a way to have you come out neatly packaged and ready for functioning within the society you live.

I learned economics in college, not in high school. And I'm quite capable of thinking for myself.

And biased government run schools has nothing at all to do with the conspiracy theories you are brushing up against. I say "brushing up against" because you haven't explicitly invoked one, but they are right there. And there are so many varieties that I'm not sure exactly which you are talking about (such as the numerous Kennedy assasination conspiracy theories). But there are a good half a dozen represented in there.

You will be taught how to work within the system you have, not pick to death at each and every flaw about that system…

That I will certainly grant. But given the end result (the most prosperous country in the history of the world), I'd say the system I'm working within is about as good as they get. I read some of Communist Manifesto for example, but the point of the reading was to compare it to capitalism, discussing why communism failed and capitalism succeeded - not to teach it in a way I could use to join the party.

Federal Reserve is a private bank ....they probably didn’t feel it necessary to mention that in your economics class.

They most certainly DO discuss the nature of the federal reserve system in economics class.

Spoken just like every brainwashed individual you will ever meet. That’s actually the beauty of it, you can’t tell the difference yourself, haha. Ok, enough of my heckling, let’s get to business;

And biased government run schools has nothing at all to do with the conspiracy theories you are brushing up against. I say "brushing up against" because you haven't explicitly invoked one, but they are right there. And there are so many varieties that I'm not sure exactly which you are talking about (such as the numerous Kennedy assasination conspiracy theories). But there are a good half a dozen represented in there.

This is really beneath you, Russ. Instead of addressing any inaccuracies in the information I have put before you and discussing historical fact, economic matters, etc, you opt to sidestep and caution of some boogieman that seems to terrify you. If you knew any real history of money you wouldn’t be talking like this in the first place because there is nothing conspiratorial about Silver Certificates, sheesh.
…Why not try adding something new and useful to our understanding of economics next time?

quote:

-BH: You will be taught how to work within the system you have, not pick to death at each and every flaw about that system…
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-RW: That I will certainly grant. But given the end result (the most prosperous country in the history of the world), I'd say the system I'm working within is about as good as they get.

You see, here you go again with the chest pounding nonsense that I mentioned earlier. Your grand trump card seems to be that because the US is the most prosperous country in the history of the world that nothing more needs to be said. This is so shot full of holes that even you should be able to see through it (after I explain the error in your thinking, again).
I take it if you had been alive back during the heyday of the Roman Empire that you would be spouting out the same nonsense? Yes, you’re right, let’s forget about discussing the mechanisms, we only need to know that it seems to be working…

I read some of Communist Manifesto for example, but the point of the reading was to compare it to capitalism, discussing why communism failed and capitalism succeeded - not to teach it in a way I could use to join the party.

Let’s be careful not to begin confusing political systems with economics. While there is certainly plenty to discuss about such things I think broadening the discussion at this point is only going to water down the topic. We ought to get our terms straight, understand a history of barter vs credit, etc, etc.

uote:

Federal Reserve is a private bank ....they probably didn’t feel it necessary to mention that in your economics class.

They most certainly DO discuss the nature of the federal reserve system in economics class.

Well I had asked you some questions about the matter but you never came back with anything about it. In fact, you haven’t told me much of anything yet (except that you were taught some things, the system works really good, dragging up history is brushing with conspiracy, etc).

Now, I don’t think you’re getting it, Russ. After the last couple of posts I don’t think you want to get it either. Now, I hate to make you sore at me ‘cause you know that I need you for advice on computer issues and stuff like that, but there are a few things in this world that I do know a little something about. Money creation and fractional reserve central banking happens to be something I’m more than just a little bit familiar with. If you are as happy as you appear to be with the status quo (without truly understanding it), well, that’s ok with me. You don’t really have to keep reminding me of who the current economic big dog is (I already know), but...

…what this topic really needs to see is a discussion of what paper money is really all about, and this involves some history that you don’t seem to have been taught. You see, if you don’t have a good understanding of what paper money is, there is simply no way that you will be able to make an intelligent decision concerning a gold standard.